One of the scariest parts about facing a financial crunch is the prospect of losing one’s family home.
In situations where a family has fallen behind in house payments and faces foreclosure, Florida law may offer some options outside of bankruptcy. Pasco County residents may also wish to consider pursuing a loan modification or other options directly with their lender.
Unfortunately, many lenders just are not willing to work with families. In other cases, a person’s financial situation is serious enough such that bankruptcy really is the best option.
The automatic stay can give a family some financial breathing space
Most families who file for bankruptcy will get the benefit of an automatic stay. The automatic stay legally prevents banks from continuing foreclosure. The automatic stay may even be able to head off a pending sale.
At a minimum, this will buy a family some additional time to reorganize their finances and, potentially, negotiate with the bank.
But Chapter 7 bankruptcy only offers limited protection from foreclosure
However, it is important for residents of the greater Tampa area to remember that, in the long term, a Chapter 7 bankruptcy will not stop a bank from selling a family’s home at a foreclosure auction.
The reason is that while a Chapter 7 can discharge a debtors of their loan, it does not take away a bank’s right to foreclose a mortgage and sell their home, just as the owners agreed.
In other words, while the bank would not be allowed to garnish their customers’ wages or seize other property, the bank still has the right to sell the home to pay off part of the debt.
A Chapter 13 is a possible avenue to save a home from foreclosure
For some families, a Chapter 7 may offer them enough financial relief with respect to other debts so that they can save their home. However, there is no guarantee of this outcome.
A Chapter 13 bankruptcy, on the other hand, can help a family save its home permanently.
As part of their Chapter 13 repayment plan, they will have to agree both to keep up on current house payments and make appropriate makeup payments over a 3 to 5 year period. If they can do so and follow all other requirements, they will stop the foreclosure.